The All In One Demat Account

Posted by nishantdhar on October 30th, 2019

Anyone who is interested to trade in share market has to own a demat and trading account. Let us understand about the importance of demat account in this article. Share market offers various investment products such as shares, bonds, mutual funds, etc. Investors invest in these products for  long or short term based on their specific requirements.

What is demat account?  As bank holds our money, this account holds all our securities in an electronic form. Dematerialization is a process of conversion of physical shares into electronic form. Confused? Earlier companies issued shares in physical form only and shareholders had to suffer a lot of delay in transactions. Not only that, physical share certificates were prone to physical damage and also many malpractices to claim false ownership of shares. To do away with all these, dematerialization was introduced in the 90s.

Demat account can be easily opened in a short time without any tedious procedure. You need not run from pillar to post or wait for several days, you can easily open it online. All demat accounts are opened with depositories such as CDSL or NDSL through depository participant/brokers. Usually, brokers don’t charge any fees to open a demat account but there are other charges like Annual Maintenance Charge (AMC) and transaction fees of which you should be aware of.

The documents like PAN, AADHAAR, personalized cheque or bank statement are needed to open demat account. You can complete the entire account opening process online and once your (IPV) In-person verification is complete, your account gets activated. You will be provided a login id and password using which you can trade. You can know about the performance of all stocks or mutual funds you hold in your account through your smartphone itself. The main advantage of demat account is the security it offers in case of storage and it also increases the efficiency of trading transactions.

SEBI, the market regulator has made it mandatory to hold shares in demat form only in case of transfer of shares. So investors who have shares in physical form can use the DRF form and apply for dematerialization if they are willing to do any trading. There is a procedure called rematerialization by which you can convert electronic shares to physical form again. Hope you got clarity about what is demat account and why it is needed. So what are you waiting for? Open demat account and begin trading!